Republican State Treasurer Eric Schmitt says the state’s pension crisis is no longer on the horizon, but at Missouri’s doorstep. During an appearance today before a legislative committee on public employee retirement, Schmitt says the state’s public pension system, known as MOSERS, has a funding deficit in excess of $5.2 billion.

State Treasurer Eric Schmitt (R)

“The future of the state’s finances are at stake,” says Schmitt. “$5 billion dollars means we are thousands of dollars in debt for every single Missouri taxpayer. This liability is the number one liability for our state – a problem that, without action, will only get worse and worse every year.”

He says MOSERS is currently 60% funded. It has missed its projections in 16 of the past 17 years. For every dollar Missouri owes future retirees, the state only has 60 cents in assets. Schmitt says a pension plan is considered healthy when it has an 80% or higher funding status.

“So 60% is alarming, but even more alarming is the trajectory,” says Schmitt. “In the early 2000s, we were nearly 100% funded. Now, just a few years later, we’re at 60% and falling.”

In a newspaper op-ed, Schmitt calls Missouri’s pensions “the number one threat to the state’s AAA credit rating”. If the funding deficit in the pension system is not addressed, he says the problem could damage funding for schools, roads, health services and other priorities.

Schmitt says the state can’t meet the “outrageously high investment assumptions”, and due to high investment fees, Missouri keeps digging deeper into a hole.

Schmitt’s appearance follows news this month about Missouri offering buyouts to about 17,000 terminated state employees. The move could save the state an estimated $7 million in annual administrative costs.

He says investment fees are another part of the problem. MOSERS has spent hundreds of millions of dollars in investment fees in recent years. Those fees haven’t stayed in Missouri: they’ve gone to Wall Street banks and Wall Street bankers.

Data from Boston College’s Center for Retirement Research shows that 135 other public pensions that disclosed investment fees and asset levels. Of those 135, MOSERS has the seventh highest investment costs.

“This is unacceptable,” he says.

At tomorrow’s MOSERS board meeting, Schmitt will call to work Missouri’s new Chief Investment Officer to curtail the investment fees.